The deceleration of the IGP-M (General Price Index – Market) in July, released by the Brazilian Institute of Economics of Fundação Getúlio Vargas (FGV Ibre), in the last week, opens up another possibility for new contracts and negotiation between owners and real estate tenants.
The economist at Fundação Getúlio Vargas (FGV), Alberto Ajzental explains that the reason is the fact that the indicator is below the Broad National Consumer Price Index (IPCA).
“The possibilities for greater lease contract negotiations happen because given the fall in the IGP-M from February to July, even being below the IPCA since May of this year, lessors will be more willing to negotiate compared to the time of the huge increase in this same index that favored them as in 2021, period of price explosion”, he pointed out.
The IGP-M, used to readjust a large part of contracts in the real estate sector and in the month of July, fell by 0.21%, lower than in June, 0.59%.
The fall has been registered since May, when the accumulated index for the twelve months reached 10.71%, a figure below the 11.73% of the IPCA.
In 2021, the rent adjustment rate reached 37.06%. With the exception of open agreements between lessees and tenants, the increase in the IGP-M caused an increase in rental prices.
The FGV economist explains that despite the value in 2022 showing lower increases, it will hardly reach the levels of before the pandemic. In 2018, the index was calculated at 1.90%.
Normally, residential lease contracts are formalized for a period of 30 months, which indicates at least two readjustments.
The properties offered for the corporate market are even longer, ranging from 60 to 120 months of minimum stay.
Ajzental says this may be the right time for a tenant to look for better prices.
“The new leases can be the way out for those who want to pay less. The old contracts suffered sudden adjustments, and if the lessor was unable to negotiate, he may be paying more than the reality of today’s market. It’s time to research.”
From the investor’s point of view, the real estate market specialist, Fabio Tadeu Araújo, believes that even with lower profits, the lease is still worth the investment.
“The last readjustments were completely out of the ordinary, based on commodities, which soared. Now, investors can see a drop in profitability, but I do not believe that it is sufficient to affect the decision to purchase properties for lease”, explains Fábio Tadeu Araújo, economist at FAU Business and specialists in the real estate market.
For Leonardo Di Mauro, managing partner of GRI Real Estate Brasil, which brings together real estate investors in 98 countries, the drop in the IGP-M is positive for the sector, but it is still too early to know if this scenario will continue.
“We are noticing a variation of the IGPM around 1 ⁄3 of what it was in 2021. We need to feel if these reductions in terms of ICMS will last. We have to wait for the measurements of the next variations to draw a more stable scenario, but so far the scenario is positive”, explains Leonardo Di Mauro, managing partner of GRI Real Estate Brasil.
Source: CNN Brasil
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